Strange indeed. And probably the fault of libwvutil, not wvdial itself.
Do we really need something as complicated as wvdial for this job? What does it
do that we couldn't manage with a simple chat script and the existing (or
slightly enhanced) initscripts?

My suspicion is that this is due to a bug in WvStreams which may have been fixed
in the latest release (4.3.0). Certainly I'm not seeing a problem with the above
configuration file and a test program written to parse it that uses 4.3.0.
Note that WvStreams' upstream location has changed. You can now grab it at:
http://alumnit.ca/wiki/?WvStreams

FC-5 EOL and 4.3.0 (and newer) in F8 and RAWHIDE (F7 has 4.2.2) - closing
NEXT_RELEASE, feel free to reopen it if the problem is still broken in F7
against F7(as in comment #10 is written that it works for 4.3.0)

Note

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